Good afternoon, everyone, and welcome to our earnings call for the first quarter of twenty twenty. On our call today, our CFO, Max Friedrich and our CIO, Johannes Laumann, will present you the results and most relevant events of the first quarter of this year. After the presentation, we are happy to answer your questions. The presentation shown is available on our website. Before I start, I would like to remind you that this call and presentation contains forward looking statements, including projections which may not develop as we currently expect.
I therefore kindly ask you to take note of the precautionary warning about forward looking statements that is included in the materials on our website. Now let me hand over to Johannes.
Good afternoon, everybody. I would like to go through the business model with a little bit of flashback of the transaction we have done in 2020 as well as the closings, which has happened so far in the first quarter. Please allow me to start with the business model overview, which we would like to show you in the following way that we put our realignment optimization and harvesting into reflection of the target of our doing here in the holding. So the consulting income, the cash flow growth and dividends are our main focus after the acquisition of a company. And starting from the consultant income, followed by dividends, we are targeting to reflect a 5x return on invested capital, which then in the harvesting part can or is targeted as an idea to go up to five to 10% on the total overall life cycle of our portfolio companies.
How to realize this is our key asset and our USP is the value creation. So the consideration of taking calculated risks evaluated by our M and A team as well as our large operational experience, which we currently have under our wings with at end of quarter one, sixty four consultants on our payroll. We request additional funding from the seller in order to make happen the turnaround of the business. And then with our own people together with the management, we do these successful turnarounds, and we stick to the DNA what we have. Important to know, the management holds more than 40% of the shares.
This is unchanged to prior year as well. Here, you see a track record, which provides the foundation of our business model. You see the vintage portfolio and our portfolio outlook. This has also been shown in a similar way during the bond presentations. The Vintage portfolio currently contributed a return on invested capital by 5.6x, which is mainly driven by dividends as well as consulting income.
As the return on invested capital is one of our main driver of KPIs as well as the return on equity. On the booked equity, as you can see here on the chart, we are focusing on those two numbers from now on. As a reference and in comparison to the book equity, we have put an NAV end of last year with €220,000,000 which will discontinue from now on, and we will focus on ROI ROE, sorry, and ROIC. The highlights on the quarter one twenty twenty. We have conducted two structured and planned exits.
We have exited the Polish business of Balkedur, and we have exited in a management buyout the Czech business of Bexiti in the first quarter. We have conducted new acquisitions, one add on acquisitions on a strategic side for Balkadur in Italy with Loterios, which enlarges the portfolio and the customer entry new customer entries for Balkadur. And then we have signed two new acquisitions with Nexiva, which we have already told in the annual call as well as we have signed last Friday, a takeover of an automotive supplier from Cooper Standard corporate carve out, and I would say a few words later on. Additional progress, the add on of RUKI completes the Dongas Group in order to become one player on the Nordic market and a very important player when it comes to steel structures in whole Europe. Under the new brand, Nordic, we firmed the new acquisitions of Ruchi Construction together with the existing brand of Normec.
As you know, in Q1, we have also successfully placed the €50,000,000 bond capital raise, and we have announced the distribution of €1 dividend in our annual meeting, which will take place next Monday. Now coming quick to the three acquisitions we have signed. We talked in the annual call about the add on of Balkhedeur and Nexive, which we expect to be closed in Q2 this year. And last Friday, we have announced the signing of a project which is called Gemini, which is a platform investment from Cooper Standard with a pretty, pretty good fit to our Elastomer group. Synergies involved there, main facilities in Poland, Italy and India.
And we have a proper plan to turn this business around as well as having synergies with Elastomer, which will form then a nice group. Also in quarter one, not only three acquisitions were signed. We also closed three acquisitions. We closed Primotek's automotive supplier board from TEGFOR. We closed Keeper Tableware acquisition from the Metzek Group, which was signed both of the transactions were signed shortly before Christmas.
And last but not least, after an intense merger control process, we closed NORDEC, which is former RUKI building system. At the April, the closing took place. Signing already took place last year, July. This brings us to the overview of the portfolio. We see with the Gemini project and Primo Tax an increase in automotive and mobility, where I also believe that as an impact of COVID-nineteen, we do see a lot of potential and a lot of good opportunities within the second half of this year.
Also in Engineering and Technologies, we do see a lot of opportunities bringing in with Balkadur or platform investments and goods and services with Vexity, with Keeper, with Sao Paulo. We have beneficiaries of the COVID-nineteen on the operational side, but we also see quite a few approaches on potential add on acquisitions for those companies. So as an outlook, when it comes to the portfolio, I do see maybe once in
a lifetime opportunities on the buy side in the second half of the year, but I also see quite good
opportunities on the sell side when it comes to companies who did run quite stable through the COVID-nineteen crisis. This closes the update Q1 on the portfolio. I will hand over to Mike Friedrich now for the financial part.
Thanks, Johannes. As always, we start the financial part with an overview of the key financial data, then look into the consolidated statement of profit and loss and the balance sheet and then go through the different developments in our different segments and close the section with a new overview of the life cycle development. Starting with the key financial data. We have, for the first time, sales that are higher than €300,000,000 in one quarter, mainly due to the M and A activity that we saw in 2019 and in the beginning of 2020. Group EBITDA dominated by this activity, by this M and A activity, we will see that this is mainly derived from the bargain purchase income, mainly from the transactions of PrimoTEX.
On the other hand, Q1 is always the most challenging quarter for us since we have a couple of bigger groups, which have a weaker Q1, especially the Bacadure Group, so that together with the new acquisitions that contribute mostly negative, we have group adjusted EBITDA of minus 10. Due to the bond raised group cash and cash equivalents increased substantially in Q1 to more than 140
slightly.
Looking at the P and L of Q1, we see that sales significantly increased compared to Q1 twenty nineteen due to the new acquisitions that were all acquired after Q1 in 2019 and that were acquired in Q1 twenty twenty. On the next page, the adjusted EBITDA shows again the development that we normally see when we acquire a lot of new companies. So we have a high income from bargain purchases here with more than EUR 50,000,000 in Q1. And on the other hand, we just started the restructuring in most of these companies and most of these new companies and had, on the other hand, also a bit of restrictions due to travel restrictions of COVID-nineteen. The income from bargain purchase, like already mentioned, comes mainly from primal tax with approximately 40,000,000 It's all preliminary.
And on the other hand, keeper tableware, which amount which account for most of this income from bargain purchase. The deconsolidation of the exit that Johannes mentioned will be accounted for in Q2 since the transactions were closed in Q2. On Page 15, the balance sheet. As always, when we do a lot of transactions, the total assets increase, in this case, a bit more than 20%. We see that here, especially the financial liabilities, long and short term, increased substantially.
This is mainly due to the bond price, but also to the debt that we cluster here for IFRS 16, which account for approximately EUR120 million in noncurrent liabilities and approximately EUR30 million in the other financial liabilities. Coming to the different segment development, it's quite different, starting with Automotive and Mobility. This is obviously, as probably already everybody knows, the most challenging segment. We see a substantial increase of sales that is mainly due to the new acquisitions of Plati, Kiko and Primatex, which account for approximately €40,000,000 in Q1 twenty twenty. On the other hand, as you might have already heard yesterday, the sales level of STS decreased by approximately €20,000,000 in Q1.
And the high M and A activity is reflected here in the EBITDA, which is significantly positive and significantly increased compared to last year. On the other hand, the adjusted EBITDA is negative due to these new acquisitions, which contribute all negatively in Q1, together with the reduction of STS, we see here minus EUR 3,000,000. Looking ahead here, the COVID-nineteen environment will be challenging or is challenging in Q2. And we will see our develops, especially in the automotive part, we are as pretty much the entire industry are highly affected by the shutdown of the OEM plants. The Engineering and Technology segment is quite mixed with Baikadur and Upek contributing negatively in terms of adjusted EBITDA and Dongas and Gemini contributing positively.
Here, the completion of part of the restructuring of the Dongus Group contributes positively compared to last year. On the other hand, Paikaduer had quite a challenging first quarter, especially compared to last year, where the company or the group is always in a special environment in Q1 since most of the services and service contracts kick in, in the Q2. So business is not or business activity is not very high in Q1. And together with the early shutdown of Italy, which is a bigger part of the Baikadura Group now, they had a bit of a setback in Q1 compared to last year. On the other hand, Gemini especially also developed compared with Dongus Group quite positively in Q1.
Here we see that the completion of restructuring in 2019 now brings fruits to Gemini with a positive EBITDA. And we believe that this will also be in the next quarter the case for Gemini. Coming to the last segment, goods and services, which substantially increased in terms of sales. In Q1 twenty nineteen, we had only two companies, Clan and Sao Paulo, which accounted for this EUR 8,000,000. And now with these bigger groups, especially Bag City, sales are substantially increasing.
Since we have here a couple of new acquisitions like Bag City and Trefier and Kipa, the adjusted EBITDA decreased compared to last year, which is quite normal. Since we just started, especially at Baqsity, the restructuring. Just to give you a figure here, Baqsity accounts for approximately EUR 2,000,000 negatively in the adjusted EBITDA. This brings us to the life cycle status of our portfolio. So we reshuffled compared to the segment presentation now our portfolio into the life cycles stages that Johannes introduced in the beginning.
Let me start with the change compared to the end of twenty nineteen. We moved Plati and Tipper from realignment to optimization. And we moved or we kind of switched Baikaduya and Dongues, where Dongues moved up and Baikaduya moved down to optimization. Reasoning from our side was that we have sold the Polish business, which was quite positively. On the other hand, Baikadu acquired with Loterios a new company and has now more an optimization in front of the group where they have to consolidate the Italian locations.
And that's why we consider this company more in the optimization phase. On the other hand, the completion of the RUKI transaction moved the Dongers Group upwards since the restructuring and integration went quite well. And we think that the integration of RUKI was quite well prepared already in Q1. And that's why we believe that Dongguis Group is now in the harvesting stage. On the other hand, you see here that in our business model, the realignment is always negatively contributing in terms of adjusted EBITDA.
So it is also in Q1, and we will see this throughout the year 2020. Optimization is also negatively. This EUR 5,000,000 loss here of adjusted EBITDA is pretty much only related to the Baikadu Group. Baikadu had a EUR 5,000,000 adjusted EBITDA loss in Q1 and the other one combined pretty much breakeven. On the other hand, harvesting contributed slightly positively, especially nice when we would look at it compared to last year, especially Dongas Group moved from a negative contribution to a positive contribution.
And also, Elastomer was able to contribute positively in Q1, which might change in Q2. And with this, I hand over again to Johannes for the closeout.
All right. Thank you very much, Marc. Before we come to the Q and A, a quick consolidation, a quick summary. So we expect a challenging environment of COVID-nineteen with the existing portfolio. But at the same time, of course, as I said before, it can be a once in a lifetime opportunity for the M and A activities in the second half of the year.
We already signed three transactions. We already did two exits. So the speed of transactions and the number of transactions are in line with past year, and I'm looking very positively forward to the second half. So the troops are ready here, and we see more and more opportunities coming into the pipeline. The target revenues, as expected, and as already said, we expect more than 1,500,000,000.0 for this financial year, which is, of course, mainly driven by the acquisitions we have done in the second half of last year and which we have also done in the beginning of this year.
If you want to name it, it's Nexiva, it's Baqsutti and it's Cooper Standard acquisition, which is close all of them close to EUR 200,000,000 in sales or slightly above even. And then we have Primatex with €100,000,000 of sales and the other add on acquisitions with closer to €50,000,000 So the M and A drives that revenue up significantly. And as always said, we want to sustain the dividend capacity and be very attractive and aggressive there as well. You saw that our main trigger will be return on invested capital, which has a direct impact on our dividend capacity. Last but not least, we would like to give you an outlook.
So in October this year, we again will hold a Capital Markets Day. It's going to be the second one after last year. And you will receive an update in the next couple of weeks and months. It's planned you can have a wild guess, but it's the Frankfurt skyline, so it's planned again in Frankfurt. And the location will be communicated then as soon as we know if we will hold it digital or if we will hold it physically.
So at the moment, it's still planned physically in Frankfurt, but we will announce if it will be turned into digital. Thank you very much. With this slide, I will hand back to the moderator for the question and answer session.
The first question is from
Sascha Rutzka from Pareto Securities. I have three questions. Maybe we can take them one by one. First, related to the pandemic and the potential or the impacts on your reported figures. We haven't seen so much impacts on the reported figures.
Maybe you can shed some light on the related impacts on revenues and earnings. You mentioned the impact in the Automotive segment. But do you have also segments which even benefited from the pandemic?
Let me try to answer this. It's a little bit difficult because it implies that I can look forward and make a prediction if it comes back or when it is over, which is a little bit difficult. Indeed, we see the largest impact in the automotive segment. And if you see the production volumes, which the OEMs have also disclosed of April, you see a decrease of 80%, 90% of the output, which has a direct impact, of course, on the automotive suppliers such as the SDS Group, such as Primotext or Kiko. With Elastomer and Plati, we also are active in other businesses.
So the hit there is not as hard. Secondly, we have companies like Dongus Group, where it's a little bit diverse. There are subcompanies where we are impacted, like Cardsip, where the travel ban or the travel restriction has a direct impact on revenues and profit. On the other hand, infrastructure projects are coming now out more and more, which is then the benefit of Dongle Steel Tech. So there, we have a little bit a pair on this.
And then, of course, we also have beneficiaries of this. We didn't know that when we bought Keeper tableware, but in fact, they do produce toilet paper, which, of course, had a very positive impact in the pandemic. So we see both, but the major hit, of course, we see in our portfolios on the automotive side. It's hard to predict on the revenue scale. The OEMs expect 30% lower output for the rest of the year compared to the original.
This is what we follow at the moment on our plans and budgets as well. So we just follow what the OEMs are predicting, which is roughly on the 30% base lower output for the rest of the year compared to original budget.
Okay, fine. And maybe related to the recent acquisitions and the expected bargain purchases of these acquisitions. You booked in Q1 fifty four million euros out of three acquisitions. And then looking at your recent acquisitions, which are not yet closed together, they are, I would guess, twice as big as these three acquisitions. Is it fair to assume that you will probably book in Q2 program purchases of, yes, more than EUR 100,000,000?
Well, the final booking is, of course, then also related to the purchase price allocation of the same. But if you take your number and let us a little bit of flexibility of 20% to 25%, you may be not so wrong.
Okay. And then certainly on Balkydoux, you mentioned the weakness at Balkydoux. What of these weaknesses operational? And what is related to the new acquisitions? And do you expect the weaker performance at Polkadu to continue in the next quarter?
So to start with the last, do we expect even weaker performance in the next quarter? The answer is no. It was Balkadia was driven by two things. So it was about the postponement of a project of the German entity And then by having the acquisition of Loterios, having STF acquisition from last year and having the original Balkhedu Italiana business, the business exposure of the Balkhedu Group now with the exit of the Polish business, the business exposure of Balkadier in Italy significantly increased. And as you know, March in Italy was a complete lockdown.
So the revenue and it was zero, basically. And then there was the large postponement of a project in Germany when it comes to the erection and commissioning, which also contributed heavily on this one. So it was a mix of Italy and the postponement of a project in Germany, which will be catched up, maybe not all in Q2, but we look quite okay into the 2020 of Balkadur. However, Q1 was, due to those facts, heavily under pressure. But Italy now has reopened.
The factories are running on a lower capacity, but they are running again, so that we will see contributions coming from there in Q2 definitely.
Okay. And maybe just a quick one. What is your consulting income on annual base with your latest transaction?
It will be in the range of 20,000,000 to €25,000,000 closer to the '25
The next question is from Holger Stefan, FMC Research. Your line is now open.
Good afternoon altogether. I have some further questions. First of all, thank you for your detailed Q1 report. Because of several acquisitions, you have achieved strong growth. I think, as usual, you have elaborated the effects of consolidation on the revenue.
Can you perhaps give us this figure?
You mean the revenue added due to acquisitions?
Yes.
Okay. Give us a second. Do you have another question?
I have some questions. So I'll start with another one. You've said the acquisition of Primo Tech led to an income from bargain purchases of nearly EUR40 million. Can we suppose that this is a sign for a very high operating loss of this company?
It's rather an extreme strong asset base than a high loss.
Okay. I wonder, therefore, a little bit that the loss of realignment companies in Q1 totaled to only €6,000,000 because you bought big companies. So what's the explanation for this?
The first thing, and maybe then I hand over to Marc. The first thing is we did negotiate well, Holger. And then I think when you see Brimatax and Bexiti as the two big buys in this one, The Bexity did quite well in Q1, was not so badly hit by COVID-nineteen. And as said, Primatax is not a heavy loss making company. The sale of this company had another strategic reason from from Techfor Group.
Sales added by acquisition account for approximately €100,000,000
€100,000,000 Okay. Thank you. You've spoken about synergies between Elastomeria and Cooper Standard activities. Do you plan to combine these companies? And what's the part of Plati, which has synergies with Elastomeria too?
We keep the companies legally separate, but there will be or the companies are separate, let's say that way. However, there are operational synergies when it comes to raw material supply, when it comes to combined sales and when it comes to combined administration. The synergies with Plati are more on the geographical side than on the product side, while the synergies between the Cooper Standard purchase and Elastomer are more on the product and customer side.
Okay. So my last question regarding the liquidity of your companies. SDS has announced yesterday a good development of liquidity in the first quarter. What's the actual situation of Tyco? And are there now, after several weeks of corona, further companies which have a difficult liquidity situation?
I think it's the first part of the question. I mean it is difficult. And also for Kiko, it's difficult. It's we are currently in a situation where the OEMs started to open the plant. But on a very low level, it looks like more like a flatter start instead of just a jump.
And we work together with all portfolio companies. It's not only Kiko. With all portfolio companies, we work on securing the liquidity in all means, including all stakeholders, meaning supplier, customers, officials, and that sometimes includes us. And it's kind of a situation where we have in the entire group situations where we need to support. For example, also, we supported the closing of Ruchi for the Dongus Group.
And this was planned and we supported. And they said also that due to the less activity like Kiteip, they see a bit of reduced liquidity. So it is in pretty much every portfolio company, except for the ones that probably profit a bit from the situation like Sao Paulo, we pretty much have no issue. But for all others, we have implemented quite strong measures to secure the liquidity.
Have any company got loans from public health programs in the meantime?
Only actually, only the STS group in France.
Okay. Thank you very much
group in France, but also Upec already received a loan.
The next question is from Felix Eisel, Education Capital.
Conduction Capital, I guess I spelled it wrong. Quick question to Johannes in Nuance one. You talked about the good opportunities you see on the buy side, which is probably obvious given the current situation, but also about the good opportunities on on the sell side. Could you maybe elaborate on that where that instinct or that statement is coming from? What are you seeing?
Are you seeing approaches from potential buyers on assets that look particularly stable on your end? Or how did that statement come about?
Difficult to answer too much in detail, Felix. We see potential approaches on the buyer side for potential buyer side. We see after quite a bit of silence in the last months and years, Chinese coming back to the European market and try to look for companies. That's number two. And number three, we do have active processes running where we look for a potential divestment of companies where we get feedback already.
At the moment, we have no further questions. As we have no further questions, I would like to hand back to you for some closing remarks.
Thank you very much for participating in this call today, and we wish you all a great rest of the day. And until next time, stay safe, and goodbye.